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Direct from Chile

Throughout this past winter, Indiana grocery stores have heralded the availability of fresh Chilean fruit. "Direct from Chile," proclaimed the ads. The same is no doubt true for other states. Astronomers and geographers will tell us that we can eat Chilean fruit in January because the earth is tilted as it orbits the sun. The tilt means growing seasons reverse themselves when one crosses the equator. But there is more to it than that. Much more.

Most people have probably forgotten that a communist attempt to remake Chile’s economy in the early 1970s was foiled by a 1973 revolution. Had the communist transformation taken hold, Chile’s current status as an agricultural exporter would be a pipe dream. Tilt or no tilt, Chile’s physical and human resources would be languishing in a communist quicksand of perverse incentives. Chileans would be sharing in the starvation and food rationing that marks the lives of North Koreans and Cubans today. Bad economics trumps astronomy and geography.

This "Direct from Chile" story doesn’t stop here, however. For when leaders of Chile’s 1973 revolution sought economic advice about bringing Chile’s economy back from its communist abyss, they chose scholars from the University of Chicago. The "Chicago tradition" in economics, along with the Austrian tradition, has amassed mountains of evidence showing that private property, open markets, and stable monetary regimes are powerful engines of economic progress. Left-liberals, socialists, and communists--steeped in dogma--have no use for such evidence. At the time, they derisively dubbed these scholars the "Chicago Boys."

But the proof of the pudding is in the eating. Following Chile’s adoption of Chicago-style free-market reforms, an economic miracle soon engulfed Chile. By 1995, per capita real income was more than two-and-a-half times its 1973 level. Inflation fell from 500 (!) percent per year in 1973 to 8 percent in 1995. Americans eating fresh fruit in January is but a small dividend from this miracle. The bulk of the dividend accrues to Chileans, who, it should also be pointed out, live in a free democratic society today.

Many Americans probably feel that eating Chilean fruit costs America jobs. Think of the jobs that could be created, goes their argument, if laws prevented Americans from buying Chilean fruit. At the very least, we should all "buy American." Thousands and thousands of workers would be needed to construct and monitor climate-controlled greenhouses throughout the United States. What a boost to the economy, huh? Wrong! You don’t have to be a Chilean communist to espouse bad economics.

The cost of Chilean fruit has nothing to do with "lost jobs." Nor is fruit costless just because it’s produced on U.S. soil. The true cost of Chilean fruit is what Chile’s citizens can buy from Americans with their fruit earnings. The cost of getting fruit from climate-controlled greenhouses is those goods and services Americans don’t produce because productive resources are tied up in greenhouses. Opting for the low-cost fruit, regardless of where it is produced, enables Americans to have fruit and more of other things. It’s the closest we’ll ever get to a free lunch.

National living standards, be it in Chile, the United States, or anywhere else, don’t just happen. Goods and services don’t miraculously appear like the manna that sustained the Israelites when they fled Egypt. Goods and services must be produced. Whatever hand providence deals a nation in terms of natural endowments, its success ultimately hinges on the nation not allowing the endowment to be trumped by bad economics.

T. Norman Van Cott is a professor of economics at Ball State University in Muncie, Indiana. Send him MAIL. See his Mises.org Articles Archive.

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The Mises Daily presents relevant short articles from the perspective of an unfettered free market and Austrian economics. Written for a broad audience of laymen and students, the Mises Daily features a wide variety of topics including everything from the history of the state, to international trade, to drug prohibition, and business cycles.